BLOOMIA HOLDINGS, INC. 10-K

Item 1A. Risk Factors Our business is subject to many risks. The following are significant factors known to us that could materially adversely affect our business, reputation, operating results, industry, financial position, or future financial performance. COMPETITIVE AND REPUTATIONAL RISKS We Face Competition We compete against other providers of advertising, marketing and merchandising products and services, and providers of point-of-purchase and other in-store solutions, as well as other marketing products and services. Competition is based on, among other things, rates, availability of markets, quality of products and services provided and their effectiveness, store coverage and other factors. We believe our positioning and offering in the marketplace is unique with our end-to-end capabilities, however brands and retailers can single-source their needs by working with others in the industry individually. We realize that by working with Insignia, we cannot always offer the lowest price in the marketplace versus a direct manufacturer, however, we can provide continuity and consistency along the entire project journey while managing the entire project for our clients, whereas they would need to source out design, production and execution individually. We Have Been Party to Significant Litigation with a Competitor We were involved in significant litigation with News America Marketing In-Store, Inc. between 2003 and 2011, which ended with a settlement. Again, on July 1, 2022, we entered into a $20 million settlement agreement with News America. The agreement memorializes the amicable settlement of the Company’s lawsuit against News America, which was initially filed in 2019. While we are not currently party to any significant litigation, the Company is subject to various legal proceedings in the normal course of business. Further, we could incur significant expenses asserting or defending future claims that could adversely affect our business, financial condition and operating results. An adverse resolution of any lawsuit or claim in favor of a third party against us, including those we become involved in through mergers and acquisitions transactions, may require us to pay substantial damages or impose restrictions on how we conduct business, either of which could adversely affect our business, financial condition and operating results. 7 Table of Contents STRATEGIC RISKS The Growth of our Business Is Dependent on Our Ability to Successfully Develop and Design Solution Offerings that Meet Client Demands Our ability to retain, increase and engage our customers and to increase our revenues will depend partially on our ability to create successful solutions and the ability to secure and maintain access to retailer locations that are appealing to CPG manufacturers. We may modify our existing products or develop and introduce new products, including acquired products. If new or enhanced products fail to engage consumers, we may fail to attract or retain customers or to generate sufficient revenues, margins, or other value to justify our investments. As a result, our business may be adversely affected. In the future, we may invest in new products and initiatives to generate revenue, but there is no guarantee these approaches will be successful or have the necessary scale to be profitable. We Face a Number of Risks Associated with Potential Strategic Alternatives As announced in December 2021, we are conducting a formal process to explore strategic options to maximize shareholder value. We intend to use reasonable efforts to identify and evaluate potential transactions, and new business opportunities. Such activities are accompanied by risks commonly encountered in pursuing and completing such transactions, including, but not limited to, increased expenses associated with the process. Failure to manage the process to a desirable outcome could harm our business, our strategy and our operating results in a material way. We are in a highly competitive market for a small number of business opportunities, which could reduce the likelihood of consummating one or more strategic alternatives. We are and will continue to be one of many participants in the pool of companies exploring strategic alternatives. A large number of established and well-financed entities, including special purpose acquisition companies, other public companies and venture capital firms, are active in mergers and acquisitions of companies that may be competing for similar opportunities or desirable target candidates as us. Nearly all these entities have significantly greater financial resources, technical expertise, and managerial capabilities than we do; consequently, we are at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating one or more strategic alternatives. While we are committed to exploring strategic options to maximize shareholder value, our management remains dedicated to operating our existing business and operations. This and other limitations on time and resources may adversely impact our ability to identify and consummate a successful strategic alternative. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will consummate any transaction. We cannot guarantee that we will be able to negotiate a business combination or other transaction on favorable terms. RISKS RELATED TO ECONOMY AND MARKET CONDITIONS CPG Manufacturers and Retailers May Be Disproportionately Impacted by Changes in Economic Conditions Our revenues are affected by CPG manufacturers’ and retailers’ marketing and advertising spending. Additionally, our revenues and results of operations may be subject to fluctuations based upon general economic conditions inclusive of the dynamic global trade environment. Recent inflation has increased our costs and we may be limited in our ability to pass cost increase along in pricing to our customers. Another economic downturn, whether because of the COVID-19 pandemic or otherwise, may reduce demand or depress pricing for our products and services and have an adverse effect on our results of operations. In addition, if we are unable to successfully anticipate changing economic conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected. 8 Table of Contents Future Pandemics May Impact Our Business A public health crisis, if sufficiently widespread as to affect economic activity, could negatively impact our business. To the extent that efforts to mitigate the effects of the crisis result in a reduction in demand, inefficiencies due to workplace accommodations, reduced availability of personnel, supply chain disruption, or constraints on materials availability, among other difficulties, our financial condition could be negatively impacted. In any such event, the severity, duration, and extent of the crisis can be difficult to predict, which can make it difficult to predict or anticipate the magnitude and length of the impact on our sales, profits, and/or cash flow. We experienced these effects with the onset of the COVID-19 pandemic in early 2020, when our operations and the operations of our CPG customers and retailers were impacted by quarantines, illnesses, and travel and logistics restrictions. In 2020, the financial impact of COVID-19 was significant as a significant number of programs originally slated for execution in the second quarter were cancelled, in addition to incremental costs incurred due to reduced levels of staffing with our execution partners. COVID-19 did not have any meaningful direct impact on our financial results in 2022. However, COVID-19 infections continue, and we cannot predict the severity and duration of additional outbreaks, new variants of the virus, or the future availability of effective medical treatments and vaccines. We also cannot predict the severity or duration of the financial impact of COVID-19 or any other public health event on our operating results. OPERATIONAL RISKS Our Ability to Attract and Retain Key Employees Is Critical to Our Success Given the unique business we operate and the importance of customer relationships to our business, our future success is dependent, in large part, upon our ability to attract and retain highly qualified managerial, operational and sales personnel. Competition for talented personnel is intense, and we cannot be certain that we can retain our managerial, operational and sales personnel or that we can attract, assimilate or retain such personnel in the future. Our inability to attract and retain such personnel could have an adverse effect on our business, results of operations and financial condition. If We Fail to Establish and Maintain Effective Internal Control over Financial Reporting, We May Not Be Able to Accurately or Timely Report Our Financial Condition or Results of Operations, Which May Adversely Affect Our Business and the Market Price of Our Common Stock. Company management is responsible for establishing and maintaining effective internal controls designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance. Any internal control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal control systems, internal control over business processes and financial reporting may not prevent or detect fraud or misstatements. The existence of one or more material weaknesses precludes a conclusion by management that a company’s internal control over financial reporting is effective. For example, the Company previously identified a material weakness at December 31, 2020 related to sales tax accounting that was remediated as of December 31, 2021. We cannot assure you that the measures we have taken to date, and actions we may take in the future, will prevent or avoid potential future material weaknesses. If we are unable to maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we could be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC or other regulatory authorities, and our ability to access the capital markets could be limited. Our Outsourcing Arrangements May Make Us Vulnerable to Third Party Failures We have arrangements with third parties for them to operate certain software applications and significant portions of our information technology infrastructure, as well as most of our production operations that are necessary to conduct our business. We take steps to monitor and regulate the performance of these third parties, but we may not be successful in managing these relationships to achieve the desired outcomes. These outsourcing arrangements make us reliant on third parties to conduct our operations and to satisfy commitments to customers. We are vulnerable to third party failures to satisfy their obligations to us, including as a result of their nonperformance, performance at standards that are not acceptable to us or our customers, changes in their methods of operation or financial condition, and other matters outside of our control. 9 Table of Contents RISKS RELATED TO OUR COMMON STOCK Our Results of Operations Have Been and May Be Subject to Significant Fluctuations Our quarterly and annual operating results have fluctuated in the past and may vary in the future due to a wide variety of factors including: · the addition or loss of customers or changes in timing and amount of our customers’ spending with us; · the timing of seasonal events for customers; · costs of evaluating and developing new products, and customers accepting new products; · the timing of additional selling, marketing and general and administrative expenses; · competitive conditions in our industry; · the addition or loss of contracts with retailers; and · the impact of strategic alternatives activities. Due to these factors, our quarterly and annual net sales, expenses and results of operations could vary significantly in the future and this could adversely affect the market price of our common stock. Investment in Our Stock Could Result in Fluctuating Returns During 2022, the sale prices of our common stock as reported by The Nasdaq Stock Market ranged from a low of $5.48 to a high of $28.80. We believe factors such as the fluctuations in our quarterly and annual operating results described above, the market’s acceptance of our services and products, the performance of our business relative to market expectations, strategic alternative exploration, as well as limited daily trading volume of our stock and general volatility in the securities markets, could cause the market price of our common stock to fluctuate substantially. In addition, the stock markets have experienced price and volume fluctuations, resulting in changes in the market prices of the stock of many companies, which may not have been directly related to the operating performance of those companies. TECHNOLOGY AND CYBERSECURITY RISKS We May be Impacted if Our Information Systems Are Attacked We rely upon information technology systems and networks, both internal and outsourced, in connection with a variety of business activities, some of which are managed by third parties. Additionally, we collect and store data that is sensitive to Insignia and its employees, customers, retailer network and suppliers. The secure operation of these information technology systems and networks, and the processing and maintenance of this data, is critical to our business operations and strategy. Information technology security threats—from user error to attacks designed to gain unauthorized access to our systems, networks and data—are increasing in frequency and sophistication. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. These threats, and a failure to maintain security protocols, pose a risk to the security of our systems, networks and products and the confidentiality, availability and integrity of the data we process and maintain. Establishing systems and processes to address these threats and changes in legal requirements relating to data collection and storage may increase our costs. Should such an attack succeed, it could expose us and our employees, customers, retailer network and suppliers to misuse of information or systems, the compromising of confidential information, theft of assets, manipulation and destruction of data, defective products, production downtimes and operations disruptions, and breach of privacy, which may require notification under data privacy and other applicable laws. The occurrence of any of these events could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. In addition, such breaches in security could result in litigation, regulatory action and potential liability and the costs and operational consequences of implementing further data protection measures. Item 1B. Unresolved Staff Comments Smaller reporting companies are not required to provide disclosure pursuant to this Item.